Network Effects, Software Provision, and Standardization

Jeffrey Church, and Neil Gandal

1/01/2005
(Original Publish Date: 1992)

In this paper, the authors examine the software provision decision of software firms. The provision decision by software firms determines the value and, hence, the market share of competing hardware technologies. The authors show how the provision decision by software firms determines whether multiple hardware technologies are supported in equilibrium or whether there is de facto standardization, with only one hardware technology supplied with software in equilibrium. They show that when consumers place a high value on software variety there is a suboptimal amount of standardization by the market.